Oil prices tumble after Israel refrains from attacking Iran’s refining facilities

Oil prices fell sharply on Monday after Israel’s attack on Iran at the weekend avoided oil and nuclear facilities and Tehran gave a measured response to the strikes.

Brent crude, the international point of reference, was down 6 per cent at $71.46 a barrel in afternoon buying and selling in the US, a drop of more than $4 on the day. West Texas Intermediate, the US point of reference, fell 6 per cent to $67.44 a barrel.

The declines came after Iran’s supreme chief Ayatollah Ali Khamenei on Sunday signalled a measured response to Israel’s attack the previous day, refraining from issuing any direct threats of retaliation.

Oil economy insiders said the falls showed prices were again being driven by macro factors such as the frail outlook for Chinese demand, which had previously been weighing on crude.

Monday’s moves were “driven by the perception that this round of tit-for-tat hostilities between Israel and Iran is contained”, said statement Farren-worth, elder research fellow at the Oxford Institute for vigor Studies.

“That doesn’t cruel it can’t escalate at a later date, but for now it means that the macro forces that have been pressuring oil lower are back in control.”

The budgetary Times reported last month that Saudi Arabia was ready to abandon its unofficial worth target of $100 a barrel for crude and boost output from December 1, adding to investor bearishness.

The US had pressed Israel to avoid Iran’s nuclear and oil sites in any retaliation to Iran’s ballistic missile attack at the commence of October. The dispute involving Israel, Iran and Iran-backed militants has raised concerns that the Middle East is heading towards a wider dispute.

However, Iran’s initial reaction was to play down the impact of the Israeli strikes. On Saturday, the General Staff of the Armed Forces said Iran’s emphasis was on supporting a ceasefire in Gaza and Lebanon.

“The recent geopolitical flare-ups are no longer reflected in a geopolitical extra charge, nor [in] the absolute level of oil worth where the bearish supply/demand dynamics are dominating still,” said Sophie Huynh, elder cross-resource strategist at BNP Paribas resource Management. “At this stage, the economy is not pricing any disruption yet on the Strait of Hormuz.”

Brent crude prices had jumped in recent weeks over fears of supply disruption.

Analysts at Goldman Sachs last week said the economy focus was shifting from the Middle East dispute towards “the risks of oversupply in 2025”, as Opec members schedule to unwind voluntary production cuts this year.

They added that in previous periods of supply disruption, Saudi Arabia and the United Arab Emirates alone had made up about 80 per cent of the shortfall “within two quarters”.

“The geopolitical uncertainty extra charge in oil prices is limited as Israel-Iran tensions have not significantly affected oil supply from the region and as spare capacity is high,” they said.